TaxTMI 
TaxTMI 
2022 (1) TMI 1424
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....of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998- 99. ITA.No.267/ASR/2007 filed by the Revenue is directed against the order dated 21.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998-99. The assessee filed C.O.No.43/ASR/2007 against the appeal filed by the Revenue. ITA.No.268/ASR/2007 filed by the Revenue is directed against the order dated 22.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998- 99. The assessee filed C.O.No.44/ASR/2007 against the appeal filed by the Revenue. ITA.No.269/ASR/2007 filed by the Revenue is directed against the order dated 22.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998-99. The assessee filed C.O.No.45/ASR/2007 against the appeal filed by the Revenue. Since common issues are involved in all these appeals and cross objections, therefore, these were heard together and are being disposed of by this common order. 2. First we take-up the appeal vide ITA.No.263/ ASR/ 2003 in the case of Shri M.K. Ajat Shatru, Jammu as the lead case. 2.1. Facts of the case, in brief, are that the assessee is an individual. He filed his return of income on 28.01.2000 decl....
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....Lacs and hence there is no capital gain" 2.3. The A.O, therefore, asked the assessee to justify the exemption/claims with evidence. However, no evidence or copy of return of M/s. Jyoti Pvt. Ltd., was furnished, for which the A.O. held that assessee could not discharge the onus caste on him. The A.O. noted that the assessee during the course of assessment proceedings vide letter dated 18.03.2002 had stated that it had held 10,000 shares @ Rs.100/- each in M/s. Jyoti Pvt. Ltd., amounting to Rs.10 lakhs by way of gift. from his father since long, however, no proof of the same has been attached. During the year assessee sold all the 10,000 shares of the face value of Rs.100/- each to M/s. Bharat Hotels Ltd., Barakhamba Road, New Delhi through its CMD Mr. Lalit Suri. Copy of agreement to sell these shares has been filed on 3.10.1997 for consideration of Rs.4,76,19,048/-. As per this deed an amount of 56 lakhs was received in the shape of pay order and the balance was to be received within 60 days. As no final deed has been filed by the assessee till date so he presumed that the balance amount was received by the assessee during the financial year under consideration. He noted that th....
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.... In absence of any proper explanation given by the assessee to his satisfaction, the A.O. treated the same as income from other sources. The A.O. accordingly determined the total income of the assessee at Rs.90,40,365/-. 2.5. Before the Ld. CIT(A), the assessee challenged the action of the A.O. in making the addition of Rs.4,43,09,048/- on account of capital gain on shares. It was submitted that assessee was holding 10,000 equity shares of M/s. Jyoti Pvt. Ltd., much before 01.04.1981. Therefore, the fair market value of these shares is relevant for the purpose of capital gain on shares. It was submitted that the fair market value of the shares of the company was determined by taking market value of all the assets of the company as on 31.03.1981 and actual liabilities as on such date have been deducted from that value. The valuation of the assets of the company has been valued by the Registered Valuer Shri S.P. Gupta, a Government Approved Valuer, Ministry of Finance. Referring to the decision of Hon‟ble Gujarat High Court in the case of A.V. Industries vs., CIT reported in [2002] 125 Taxman 59 it was submitted that once there is report by the Registered Valuer, it is incum....
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....of agricultural land and payment receipts to whom the agricultural produce has been sold were produced before the Ld. CIT(A). It was accordingly argued that the addition made by the A.O. should be deleted. 2.7. Based on the arguments advanced by the assessee, the Ld. CIT(A) deleted both the additions made by the A.O. So far as the addition of capital gain is concerned, the Ld. CIT(A) deleted the same by observing as under : "3. The appellant submitted the valuation report from the Govt Approved Valuer, Shri S.P. Gupta. The deed of Family Settlement between Dr Karan Singh, Maharani Yashoraja Laxmi and the appellant. The receipts regarding the payment on account of sale of apple orchard at Karan Mahal, Srinagar has also been submitted. The case was partly heard on 16-01-03. On 18-03-2003, the appellant came forward with a certificate from Division Commission, Kashmir regarding the market value of the land pertaining to the Grand Palace Hotel Sinagar (Oberoi Palace Hotel). The counsel in the appeal submitted the arguments regarding the system of valuation of unquoted shares of private companies. The counsel submitted that the market value of unquoted equity shares of Compa....
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....sp;2368.38 x 331 transferred in the financial year 100 1997-98 = 7839.34 Total No. of shares of the Company as on 1-4-1981 &n....
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....ax Act with the plea that there is no other way that we can proceed with the matter of share valuation particularly when it is not quoted and it belongs to a private limited Company. If we are focusing on the issue of valuation on 1-4-1981, we must therefore keep in mind the considerations dwellings in the mind of buyer seeking to buy these share. Naturally he would be driven by the net value (Assets- liabilities) of the Company to which these shares belong. 6. I find that rule ID exactly deals with valuation in this manner. Although the rule was framed to determine Wealth, it would naturally be help to determine value for our purpose. It is a logical accounting procedure particularly since no specific methodology is suggested in Income Tax law book for this. I, therefore agree with the computations submitted by the Counsel supported by rule 1D mechanism. 7. The hurdle however remains pertaining to valuation of land of the hotel since the Regd. Valuer has not based his valuation report on any sales instance. No body however can blame him for this apparent lapse since turmoil in the valley has left no land transactions to depend upon for estimation of value. This h....
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....s for last 3 to 4 years that plantation of Apples and cherry trees had been undertaken and this is the First year when the orchard yield has been sold by the appellant. If the intentions of the appellant were otherwise, he might have introduced the agriculture income ever since it came into the possession of the agricultural land the documents of which have been submitted before the undersigned. Moreover the payment receipts have also been submitted by the appellant. The years prior to the current year are irrelevant to be considered because there was no agricultural income claimed/shown by the appellant. In view of this there is no doubt that the appellant had genuine agricultural income and the observations of the Assessing Officer that this is from undisclosed sources is unwarranted. 11. Appeal is, therefore, allowed". 3. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds : "On the facts and in the circumstances of the case. 1. The Ld. CIT (A) erred in law in deleting the addition of Rs.4,43,09,048/- under the head 'capital gain' arising from sale of equity shares held by th....
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....l as the Ld. CIT(A) had otherwise invoked for the purpose of determining the fair market value of the impugned shares as on 1.4.1981. 3. That on the facts and circumstances of the case and in law CIT(A) erred in accepting the land measuring 225.85 Kanals valued at Rs. 19,87,48,000/- by the valuer in his report. 4. The Ld. CIT(A) erred in law in relying on certificate of valuation of land by approved valuer for the purpose of valuation of equity shares under Rule 1DD of W.T. Rules. 5. That the appellant craves leave to add or amend or alter any grounds of appeal before or time of hearing". ITA No.269/ASR/2007 (A.Y. 1998-99) "On the facts and in the circumstances of the case. 1. The Ld. CIT (A) erred in law in deleting the addition of Rs.3,88,08,572/- under the head 'capital gain' from sale of equity shares held by the assessee in M/s Jyoti Pvt. Ltd. 2. The Ld. CIT(A) erred in applying wrong text of rule 1DD of W. T. Rules 1957 the rule which the assessee as well as the Ld. CIT(A) had otherwise invoked for the purpose of determining the fair market value of the impugned shares as on 1.4.1981. 3. That on....
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.... and disposed off." 8. Ld. Counsel for the assessee at the outset submitted that cross objections are filed by three assessees namely, Dr. Karan Singh, Shri Vikramaditya Singh and Smt. Yashorajya Lakshmi wherein the respective assessees have challenged the proceedings u/s. 147 of the IT Act, 1961 since the same has not been validly initiated and therefore not tenable. However, in the case of Mr. Ajat Shatru Singh contention is being raised under Rule 27 of the ITAT Rules and the assessee is contending that no valid assessment could have been framed u/s. 143(3)/147 of the Income Tax Act, 1961. He also relied on various decisions to the proposition that the respondent is entitled to raise a legal ground at any stage of the proceedings, even though he may not have filed an appeal against such an order. 9. Ld. Special Counsel on the other hand submitted that the question of validity of notice u/s. 148 is not the subject matter of assessment or appeal either before the CIT(A) or before the ITAT. The assessee is not the appellant. Therefore, the assessee as respondent is precluded from raising this new plea for the first time before the ITAT under Rule 27 of the ITAT Rules. Referri....
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....assessee, as a Respondent before the ITAT was entitled to agitate the jurisdictional issue relating to the validity of the reassessment proceedings. We are, therefore, of the considered opinion that the impugned order passed by the ITAT suffers from perversity in so far as it refused to allow the Appellant - assessee (Respondent before the Tribunal) to urge the grounds by way of an oral application under Rule 27. The question of law as framed is answered in favour of the Appellant - assessee and resultantly the impugned order is set aside. The matter is remanded back before the ITAT with a direction to hear the matter afresh by allowing the Appellant- assessee to raise the additional grounds, under Rule 27 of the ITAT Rules, pertaining to issues relating to the assumption of jurisdiction and the validity of the reassessment proceedings under Section 153C of the Act." 10.1. Since all material facts and documents for adjudication of this legal ground are already on record, therefore, we admit the legal ground raised by the assessee under Rule 27 of the ITAT Rules. 10.2. Both the sides made extensive arguments and filed written synopsis. 11. Ld. Special Counsel for the Revenu....
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....madiya Singh 15,000 10,000 - 5,000 - 4 Smt. Yashorajaya Laxmi 17,000 11,500 3,500 - 2,000 TOTAL: 63,000 38,650 6,350 10,000 8,000 Note: Out of total 63000 shares in Jyoti (P) Ltd. sold by the 4 shareholders, only 38650 shares were held as on 1.4.1981. The balance 24,350 shares cannot be reflected to the provisions of section 55. 12.2 He submitted that under four separate agreements, each of which is dated 3-10-1997 all the four shareholders of M/s Jyoti (P) Ltd transferred their shareholding to M/s Bharat Hotels Ltd. the details of which are as under: Table -2 S No. Name of the shareholder No. of shares held and transferred Aggregate consideration received (Rs.) Consideration per share (Rs.) 1 Dr. Karan Singh 21,000 10,00,00,000/- 4,761.90/- 2 Shri Ajatshatru Singh 10,000 4,76,19,048/- 4,761.90/- 3 Shri Vikramadiya Singh 15,000 7,14,28,572/- 4,761.90/- 4 Smt. Yashorajaya Laxmi 17,000 8,09,52,380/- 4,761.90/- TOTAL: 63,000 30,00,00,000 13. Ld. Special Counsel for the Revenue s....
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....; of the shares held by the assessee prior to 1.4.1981 in Jyoti (Pvt.) Ltd. He submitted that this is because all the assessees have exercised option under section 55(2)(i) of the I. T. Act that the market value of the shares held as on 1.4.1981 may be substituted for the actual cost of acquisition. Hence, the dispute revolves round the question of law as to what method of valuation of unquoted shares in a private company held by all the four assessee should be adopted for determining the market value as on 31.3.1981. 15. He submitted that before Ld. CIT(A), it was pleaded that the fair market value of the shares of Jyoti (P) Ld. as on 1.4.1981 should be determined in accordance with Rule 1-D of the Wealth Tax Rules, which were in force as on April 1 1981. Thus, the order of the Ld. CIT(A) makes it clear that:- a) the fair market value of the shares of Jyoti (P) Ltd. as 1.4.1981 should be determined as per Rule 1D of W. T. Rules. b) He has misled himself by using wrong text of the said Rule 1D of the WT Rules. c) The CIT(A) thus erroneously did not take the book value of the assets shown in the Balance Sheet of Jyoti (P) Ltd. as on 31.3.1981. ....
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....erty) iii Jyoti Cold Storage iv) Palace Motel, Taragarh v) Hari Niwas, Jammu vi) Lakshmi Kutir, Srinagar viii Central Unit. (Pg. 60/Dept. PB in Dr. Karan Singh Annexure 2 at Pg. 13) He submitted that the land on which Gulab Bhawan (subsequently, named Oberoi Place Hotel) is situated is not shown in Balance Sheet of the Company. 17. Ld. Special Counsel for the Revenue submitted that regardless of the stand taken by the assessee or by the department, the Tribunal is duty bound to apply correct law on the facts found by the lower tax authorities. He submitted that the Principle or method of valuation of unquoted shares or shares of a private company is a question of law as held by Hon‟ble Supreme Court in the case of Ambalal Modi, 170 ITR 144 S.C.). He submitted that the earning / yield method or any other method prescribed in a statute can be applied for determining FMV of a shares in private company which is a going concern as on valuation date. The "Breakup method" can be applied only if the company is in the process of liquidation, or, if the conditions prevailing on the date of valuation are uncertain. He sub....
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....e market value of its shares. In all other cases relied on by the Ld. Senior Counsel for the assessee as per case law compilation including Madhu Tyagi & Mrs. Shashi Dharnidharka the impugned asset was shown in the Balance Sheet of the company and the only dispute was as to whether the valuation of the unquoted share should be valued by taking the book value or the market value of that asset. He submitted that the land on which the building is situated is not shown in the B/S of Jyoti (P) Ltd. In fact, the Regd. Valuer or the CIT(A) in the case of Ajatshatru Singh or the CIT(A) in the case of Dr. Karan Singh & others have not even referred to the B/S of Jyoti (P) Ltd. 20. Ld. Special Counsel submitted that another feature of arbitrary valuation of shares of Jyoti (P) Ltd. made by the assessee, which has been accepted by both the C.I.T.(Appeal), is that the rest of the properties and businesses as shown in Balance sheet of the company have been totally ignored. He submitted that the Regd. valuer's report of 2003 values not only the building Gulab Bhawan but also 225 Kanals of land appurtenant to it which was not shown in the B/S of Jyoti (P) Ltd. and which never belonged to t....
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....n be applied where no rule for valuation of unquoted shares prescribed: i) CIT Vs. S. Balasubramaniam l59 ITR 288 (Mad.) 85 ii) CIT Vs. Rajiv Gupta 292 ITR 262 (Del.) 182 iii) CIT vs Steward & Lloyds (Overseas) Ltd. 197 ITR 406(Statutes.) iv) CIT Vs. Smt. Shakuntala Devi, 250 ITR 677 (P&H) v) CIT Vs. Mammen Mathew, 158 ITR 466 (Ker.) vi) Cont. of Estate Duty Vs. R. M. Sukhadvala 192 ITR 389 (Bom.) vii) Shyamsukh Garg Vs. Controller of ED 145 ITR 238 (MP) viii) Smt. Urmila Ranka Vs. Controller of ED 262 ITR 321 (Raj) ix) Controller of ED Vs. GK Swarup 275 ITR 137 (Guj) x) C.E.D Vs. Krishna Murthy, 96 ITR 87 (Mys) xi) Madhusudan Dwarkadas Vora Vs. Supt. of Stamps 141 ITR 802 (Bom) 24. Referring to the decision of Hon‟ble Bombay High Court in the case of CIT Vs. GM Abhayankar (HUF), 214 ITR 269 (Bom), he submitted that assets shown in the balance sheet of the company only to be considered. He submitted that Rule 1D of W.T. Rules is recognized method of valuation. For the above proposition, he relied on the following decisions:- i) CIT Vs. S. Balasubramaniam, 159 ITR 288....
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.... by the revenue against the order of the learned CIT(A) was also dismissed when it was held by him that he did not invoke Rule 1D of the Wealth Tax Rules. He accordingly submitted that the ground no. 2 and ground no. 4 raised by the revenue in the concise grounds of appeal do not arise either from the order of the AO or from the impugned order of the learned CIT(A), and hence both the aforesaid grounds deserves to be dismissed on this ground alone. 28. Ld. Senior Counsel submitted that in ground no. 1, it has generally been contended that, the Learned CIT(A) erred in law in deleting the addition under the head "capital gains‟ from sale of equity shares held by the assessee in Jyoti Pvt. Ltd. He submitted that the ground is non-specific and is a general ground. 28.1. He submitted that in ground no. 2, it has been contended by the revenue that Ld. CIT(A) has erred in applying wrong text of rule 1DD of W.T. Rules, 1957, the rule which the assessee as well as the Ld. CIT(A) had otherwise not invoked for the purpose of determining the fair market value of the impugned shares as on 01.04.1981. From the perusal of the order of learned CIT(A) (in the case of Shri M.K. Ajatshatr....
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....er since by adopting fair market value of land and also building, there was no capital gain, as such, valuation of other assets as reflected in the balance sheet would have been merely an academic exercise, as none of the assessee had claimed any loss to be set off/carried forward. 28.4. So far as ground of appeal no.3 is concerned, he submitted that it has been contended by the revenue that the Ld. CIT(A) erred in law in admitting additional evidence by way of certificate from the Divisional Commissioner without giving any opportunity to the AO. He submitted that it would be seen from the revenue‟s record itself, i.e. from the paper book filed by the revenue in the case of Shri M.K. Ajatshatru Singh that the AO had obtained a report from the Tahsildar and is dated 28.03.2006, (Pg. 114 of DPB) wherein he had reported the value of land at Rs. 30 lacs per kanal in the year 1998, when the fair market value had substantially fallen on account of insurgencies and terrorist activities, which shows that the fair market value of land as adopted by registered valuer at Rs. 8.80 lacs per kanal as on 01.04.1981 was supported by the evidence on record. It is thus incorrect to suggest ....
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....hen the insurgency activity and terrorist activities in the state of Jammu and Kashmir has been increased) has been estimated at Rs. 30 lacs per kanal. 29. He submitted that in Ground No. 4 revenue has contended that Ld. CIT(A) has erred in relying on certificate of valuation of land by approved valuer for the purpose of valuation of equity shares under Rule 1DD of W.T. Rules. He reiterated that Ld. CIT(A) had not invoked Rule ID or 1DD as has been stated in the grounds for the purpose of determining the fair market value of the impugned shares as on 01.04.1981, and on the contrary, he has computed the fair market value of asset held by the company to determine the fair market value of the shares. In the instant case, the learned AO proceeded to determine the FMV on the basis of value estimated by the registered valuer of the hotel building, however since M/s Jyoti Pvt. Ltd. was also holding leasehold interest in land whose value has been determined by the registered valuer, and on the basis of the valuation of the registered valuer, the respondents have computed the capital gain, which has been upheld by the learned CIT(A). He submitted that once the value of building estimated....
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....market value of the other assets held on 01.04.1981 has not been considered. 32. He submitted that in these cases, the assessments were not made under Wealth Tax Act as such the concept of valuation under Wealth tax of the shares as on 01.04.1981 is completely foreign to the issue involved, and since the FMV of the asset transferred is to be determined which in the instant case would be right, title and interest in land held by the Company on the date of transfer is to be valued. He submitted that valuation of shares as provided under Wealth Tax Rules is entirely inapplicable for the purpose of determining the fair market value under section 55(2)(b) of the Act. He accordingly submitted that Ground No. 4 raised by revenue deserves to be dismissed. 33. Ld. Counsel for the assessee submitted his arguments regarding the Capital Gain deleted by the Ld. CIT(A) by stating as under:- (a)While adopting the fair market value as on 01.04.1981, the value of leasehold interest in the land be also held to be included in the value of asset of M/s Jyoti Private Limited, so as to determine the fair market value of shares held by the shareholders. (b)The leasehold interest i....
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....thers vs. CWT 85 ITR 201 (AP) (v) CIT vs. M.N. Enterprises 293 ITR 35 (Kar) (vi) Jaya Hind Sciaky Ltd. vs DCIT reported in 383 ITR 25 HC (Bom) (vii) Andhra Networks Ltd vs DCIT reported in 167 TTJ 496 (viii) CIT vs HormasjiMancharjiVaid reported in 250 ITR 542, (ix) Andhra Networks Ltd vs DCIT reported in 167 TTJ 496 33.4. Referring to the following decisions, he submitted that the Fair Market Value has to be determined and not the value of shares: i. Smt. Krishna Bajaj v. ACIT [2014] 267 CTR 172 HC(Kamataka) ii. Jagatram Ahuja v. CGT [2000] 246 ITR 609 (SC) iii. Smt. B. Subhadra v ITO reported in 92 ITD 285 ITAT (HYD) iv. Addl CIT v Smt Indira Bai 151 ITR 692 (AP) v. Smt. Vasavi Pratap Chand v DCIT 89 ITD 73 (Del) vi. ACGT v K.K. Gosain 66 ITD 26 (Del) vii. CGT v Smt. K.G. Rajyalakshmi 223 ITR 225 (AP) ix. C WT V Shri Katur Bhai Mayabhai reported in 164 ITR 107 at page 127 ix. Rekha Mathur v ACIT reported in 98 TTJ 900 ITAT (Del) x. Dr. Louis PrakasamKanaiya v ACIT reported in 74 ITD 379 (Mad) xi. Bharat Hari Singhania vs. CWT reported ....
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....as duly discharged, and onus was on the AO to rebut the same by leading some material, and hence in the absence of the same, addition made was untenable. Ld. Counsel submitted that the Ld. CIT(A) after considering the details filed before him has deleted the addition. He accordingly submitted that Ground No. 5 raised by revenue in the case of Shri. M.K. Ajatshatru Singh deserves to be dismissed. 35. He accordingly submitted that apart from the aforesaid no other ground has been raised by the revenue in the concise grounds of appeal, therefore, all the appeals filed by the revenue deserves to be dismissed. 36. So far as validity of reopening of assessment in the case of Ajat Shatru Singh is concerned, the ld. Counsel for the assessee submitted that a perusal of the reasons to believe, (page 27 of DPB), shows that proceedings had been initiated to bring to tax a sum of Rs. 5,85,071/- (being the sum disclosed in the return of income filed on 28.01.2000, which return has been alleged to be invalid return). He submitted that, the return filed on 28.1.2000, which had been held as invalid earlier has been treated as valid, while framing assessment u/s 147/143(3) of the Act. He submi....
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....to provisions of Section 147 of the Act and submitted that the foundational condition that "income should escaped assessment" has not been complied as the amount which has been alleged to be escaped assessment has already been offered to tax and tax has also been paid on such income, as such, once there is no escapement of income, assumption of jurisdiction itself is bad in law. 39. Referring to the reasons recorded by the A.O. he submitted that in the reasons to believe, the AO has stated that "since an invalid return is no return in the eyes of law, as such, I have reason to believe that income amounting to Rs. 5,85,071/- declared by the assessee in the invalid return has escaped assessment in terms of section 147 of the Act.'" He submitted that the aforesaid reasons of the AO shows that no income of the assessee has escaped assessment, since such income has already been offered to tax, and hence the prerequisite before issuance of notice of escapement of income being not satisfied, assumption of jurisdiction u/s 148 of the Act and consequent order of assessment passed is unsustainable in law. Ld. Senior Counsel for the assessee submitted that to justify the reopening of t....
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....tax effect. He accordingly submitted that judgment in the case of Ranbaxy Laboratories Ltd. v. CIT [20111 336 ITR 136 still holds good and applicable to the case of the assessee. 41. So far as the reopening in the case of Dr Karan Singh and other two assessee‟s are concerned, he submitted that proceedings u/s 148 of the Act was initiated after a period of four years from the end of the relevant assessment year without surfacing of any fresh tangible material and merely on the basis of the assessment made in the case of Shri M.K. Ajatshatru Singh. He submitted that assessment made in the case of Shri M.K. Ajatshatru Singh is merely an opinion of the AO which assessment was subject matter of appeal before the ld. CIT(A), wherein ld. CIT(A) has deleted the addition made by the AO vide his order dated 18.03.2003, which was available at the time of issuance of notice u/s 148 of the Act on 24.03.2005. It would therefore be seen that since the ld. CIT(A) has reversed the finding the ld AO, as such reasons to believe recorded on the basis of an order which had been found untenable is unsustainable in law. In any case, such an assessment itself is unsustainable in law, hence assump....
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....vs. Sushma Gupta xv) 114 ITD 69 (Del) (TM) ACIT vs. O.P. Chawla xvi) 324 ITR 154 (Bom) Prashant S. Joshi and Dattaram Shridhar Bhosale vs. ITO and UOI xvii)324 ITR 289 (Del) Jay Bharat Maruti Ltd. vs. CIT xviii) SCA 858 of 2006 Inductotherm (India) Pvt. Ltd. vs. CIT (Guj) xix) 252 CTR 316 Puri Brothers vs. CIT xx)246 CTR 308 (MP) CIT vs. Trimurti Builders xxi) 348 ITR 299 (SC) ACIT vs. ICICI Securities Primary Dealership Ltd. xxii)[2008] 300 ITR 276 (Bom) Sanghvi Swiss Refills (P.) Ltd. vs. Asst. CIT xxiii) [2007] 213 CTR 193 (Raj) CIT vs. Manohar Lai Gupta xxiv) W.P. (C) 7660/2012 dated 28.1.2014 (Del) Mohan Gupta (HUF) vs. CIT xxv) 291 ITR 500 (SC) Asst. CIT vs. Rajesh Jhaveri Stock brokers Pvt. Ltd. xxvi) ITA No. 4613/Mum/2005 Telco Dadajee Dhackjee Ltd. vs DCIT 41.3 Referring to the following decisions, he submitted that the issue of reopening of assessment is a purely legal ground and can be raised before the Hon‟ble Tribunal: i. ACIT v. Pai Vaibhav Hotels (P) Limited in ITA No. 2638/ 2005 (High Court of Karnataka) ii. VMT Spinning Co. Ltd. vs.....
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....d interest together with the structures put up there on to a third party in the event of default. Jyoti Pvt. Ltd. is a closely held Private Limited Company having only 4 (four) Shareholders namely Dr. Karan Singh, his wife Smt. Yasho Rajya Lakshmi and two sons Shri Vikramaditya Singh and Shri Ajatshatru Singh. The Company had given the property under a management contract to M/s EIH Limited (the flagship Company of Oberoi Group of Hotels) which was operating the " Hotel Oberoi Palace" in the said property On account of increasing terrorist activities in the Kashmir Valley during 1990 the Oberois had abandoned the property. The property was lying vacant from 1990 to 1997. M/s Bharat Hotels Limited offered to purchase the property by way of acquiring all the shares of Jyoti Pvt. Ltd. The Shareholders agreed for the sale of the property by way of agreeing to transfer their entire shareholding to M/s Bharat Hotels Limited. Accordingly, each of the shareholders had simultaneously entered into Agreement to Sell with Bharat Hotels Ltd. on 03.10.1997 thereby agreeing to transfer their entire shareholding in Jyoti Private Ltd. in favour of Bharat Hotels The Agreements to sell were subject t....
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.... and adopted the face value of shares as cost of acquisition in the case of M. K. Ajatshatru Singh and made addition of Rs.4,43,09,048/- to the total income of the assessee under the head Capital Gain. Thereafter, assessments of the remaining three shareholders were framed when the AO had proceeded to determine the fair market value of said shares on the basis of the breakup method i.e. by adopting the fair market value of the hotel building (as per the report of the approved valuer) to be divided by the number of shares held by the shareholders. We find the Ld. CIT(A) deleted the addition the reasons of which are already reproduced in the preceding paragraphs. 46. We do not find any infirmity in the order of the Ld. CIT(A) on this issue. We find the fair market value of the shares adopted by the AO in the case of Shri M. K. Ajatshatru Singh was Rs. 331 per share after indexation, whereas in the case of three other assessee‟s, same has been adopted at Rs.3262 per share after indexation. However, the assessee computed the fair market value of the asset of the company as per the registered valuer, and the average fair market value of each share was computed Rs. 6,151.64 and ....
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....d in adopting the cost of acquisition on the basis of fair market value of the super structure. It has been contended by Ld. Special Counsel for Revenue that the value as reflected in the balance sheet be adopted as provided under Rule 1D of WT Rules. It is his submission that as on 01.04.1981 (Pg. 59-63 of Department Paper Book in the case of Dr Karan Singh) there were number of other buildings owned by M/s Jyoti Private Limited. 50. We find the AO himself had applied the fair market value of building and, other assets, while computing capital gain in the case of three other assessee‟s, namely Dr. Karan Singh and, others, which is conceptually different than the face value of shares as had been adopted in the case of Shri M.K. Ajatshatru Singh. In those cases, the AO had merely not included the fair market value of the leasehold interest in the land since the land was not owned by the company and, was not reflected as an asset in the balance-sheet. Therefore, we find merit in the argument of the Ld. Sr. counsel for the assessee that in such a situation, to contend contrary to what has been adopted by ld AO, obviously amounts to setting up a new case, which is contrary to ....
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.... same is the actual cost of acquisition of shares. 53. We find for the purposes of section 48 & 49 cost of acquisition has been defined in section 55(2)(b)(ii) of the Act which reads as under: "(2) For the purposes of sections 48 and 49, "cost of acquisition"......, - (b) in relation to any other capital asset,- ......(ii) where the capital asset became the property of the assessee by any of the modes specified in subsection (1) of section 49, and the capital asset became the property of the previous owner before the 1st day of April, 1981, means the cost of the capital asset to the previous owner or the fair market value of the asset on the 1st day of April, 1981, at the option of the assessee;...." 54. We find the term "fair market value" has been defined in section 2(22B) of the Income Tax Act and, reads as under: "fair market value, in relation to a capital asset, means- (i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and (ii) where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made ....
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....sets held by the company as on 01.04.1981 as per the contention of the revenue is to be included then it would obviously mean a remand, which will only prejudice the interest of revenue since as on 01.04.1981, assets held by the company were many properties as against only one, which has been considered by the AO himself. The contention of the revenue overlooks the facts that as on 01.04.1981 the company M/s Jyoti Private Limited had number of buildings as is reflected in their balance sheet, the fair market value whereof would be many times more and it was for this reason the AO apparently had not proceeded to determine the cost of acquisition of shares as on 01.04.1981 by adopting the fair market value of all the assets. There is substantial difference between the fair market value of the asset and the value of an asset. It may be for the purpose of Wealth Tax Act, the value of asset is to be determined on the basis of book value but so far as the Income Tax Act is concerned, the fair market value of all the asset has been defined in section 2(22B) of the Act and is thus to be adopted. 58. So far as the contention of the Ld. Special Counsel for the revenue that the Apex Court ....
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....h on which the wealth tax was payable. The Wealth Tax Act provides a mechanism, under which the property is valued and net wealth determined for the purpose of payment of wealth tax. It is not a fair market value. Therefore, in determining the fair market value under the Act, neither the guideline value prescribed for the purpose of stamp duty and registration under the Karnataka Stamp Act and the Indian Registration Act nor the net wealth value arrived at under the provisions of the Wealth Tax Act, cannot be the guiding factor. The market value of the property is certainly far more than the guideline value. Similarly, the value of the property, which is the subject matter of wealth tax, is also far more than the value for which it is assessed under the Wealth Tax Act. Therefore, the authorities were not justified in relying on those two inadmissible piece of evidence to arrive at a fair market value. 60. Similar view has been taken by the Delhi Bench in the case of Madhu Tyagi vs DCIT reported in 19 SOT 612 and appeal filed by the Revenue has been dismissed by the Hon‟ble Delhi High Court in ITA No.685/2008 dated 07.07.2008. Similar view has also been taken in the followi....
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.... which had been estimated at Rs. 1987.48 lacs and represented the value of land. We find force in the arguments of Ld. Sr. Counsel for the assessee that since in the state of Jammu and Kashmir no person other than the resident of the state can own the land, the title to the land stood in the name of Shri Vikramditya Singh and even the Hotel Building would have no independent value, if the land on which the building stood is not considered. Further, we find from deed of lease dt. 21.3.1973 that at the time when M/s Jyoti P. Ltd., had purchased the building by another deed of relinquishment on 21.3.1973, the Hotel Building was already existing on the land so leased and as such virtually it was a case where M/s Jyoti P. Ltd., had an absolute interest despite the fact it was only where the title of the land remained in the name of Shri Vikramaditya Singh. We find even the residual ownership rights were transferred in favour of Sh. Narendra Batra (who was the state subject i.e. resident of Jammu & Kashmir), who was a nominee of Bharat Hotels Ltd. on 16.1.1998 for a nominal value of Rs. 10 lacs when Perpetual Lease Deed was granted in favour of M/s Jyoti (P) Ltd. 65. We, therefore, fi....
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....ngh are identical, therefore, following similar reasoning, the ground raised by the Revenue on this issue are dismissed. 69. The second issue that requires adjudication is regarding the order of the ld. CIT(A) in deleting the addition of rupees one lakh treating the same as agricultural income as against "income from other sources" held by the AO. 70. After hearing both the sides, we find the Assessing Officer treated the agricultural income of rupees one lakh declared by the assessee as "income from other sources" on the ground that the assessee could not substantiate its agricultural income and the assessee was not showing any agricultural income in the past years. We find the Ld. CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraph. 71. We do not find any infirmity in the order of the ld. CIT(A) on this issue. The assessee before the Assessing Officer as well as the Ld. CIT(A) had filed the details of agriculture produce and the details of sale etc. It is also submitted before the Ld. CIT(A) that the apple and Cherry trees which were planted before three four years earlier had started giving fruits during the year and....
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....94 Taxmann.com 89 (Del) when they have held differently is concerned, we find from the details furnished by Ld. Sr. Counsel for the assessee that the Revenue had withdrawn the appeal before the Hon"ble High Court on 7th February, 2020 on account of low tax effect. The ld. Special Counsel for the Revenue could not controvert the above submission of Ld. Senior Counsel for the assessee. Therefore, we agree with the ld. Sr. Counsel for the assessee that the judgment in the case of Ranbaxy Laboratories Ltd. v. CIT (supra) still holds good and applicable to the case of the assessee. The reopening of assessment in the case of Mr. M.K. Ajat Shatru Singh is accordingly liable to be quashed. We hold accordingly. 74. So far as the reopening of the assessment in the case of Dr. Karan Singh and other two assessees are concerned, we find the proceedings u/s 148 of the Act was initiated after a period of four years from the end of the relevant assessment year. The entire basis on which the proceedings had been initiated u/s 147 of the Act in the case of the three assessees was on the basis of the findings recorded by the A.O. in the order of assessment dated 26.03.2002 in the case of Mr. M.K. ....